What is a Self-Managed Superannuation Fund? A self-managed super fund (or SMSF) is the same as any other external superannuation fund, however with the main difference being that you control your investment portfolio and not some faceless person you have never met. If you are on a high wage and your employer is paying their 9.5% contribution for you to an external super fund, you can establish your own SMSF and direct your employer to pay those contributions direct to your SMSF instead. The balance(s) of all your external funds can be rolled over to your SMSF, which will give you greater control over how these funds are managed.
The Trustee
The Superannuation Industry (Supervision) Act (SISA) provides that all members of the fund are required to be trustees of the fund. Where a company is appointed to act as trustee, all members of the fund must be directors of the company.
The Trust Fund
The Trust Deed outlines the rules of the Trust Fund and how it is to be administered, similar to the Articles of Association of a company. In the event the trustee’s actions contravene, the trust deed rules any breach is considered a breach of SISA, which will result in the fund not being a complying fund and hence, would result in the fund losing its tax concession.
Members
The maximum number of members permitted in a Self-managed super fund is four (4).
Contributions
The concessional contributions cap for the year ending 30th June 2019 is $25,000.00.
These contributions can be made by the employer (employer contributions) and or personal contributions.
Personal Contributions (Salary Sacrifice)
An employee can elect to take some of their remuneration package as superannuation contributions instead of cash or other benefits. The salary sacrifice amount and the employer contribution cannot exceed the maximum contributions allowable in accordance with the above mentioned 'contributions'. The advantage of salary sacrifice contributions is that it is excluded from Pay As You Go deductions made by the employer. Consideration should be given to increasing salary sacrifice contributions as one gets closer to retirement.
Non-Complying Superannuation Fund
A fund is deemed a ‘non-complying fund’ if the Trustees:
Fail to manage the fund in accordance to the Trust Deed;
Invest, loan and/or lease to related entities (known as in-house assets);
Hold in-house assets at any time during the year that exceeded 5% of the total assets;
Hold an investment in a related party at any time during the year (excluding in-house assets);
Acquired any assets (other than exempt assets) from related parties;
Lend money or provided financial assistance to a member or relative of a member of the fund;
Allowed members to have personal use of the fund’s assets prior to retirement;
Failed to develop a strategy investment plan;
Fail to keep and retain for at least 10 years, minutes of meetings of the trustees;
Runs a business with fund proceeds;
Buy assets for personal use.
Investment
Assets your SMSF can invest in:
Shares – listed on the Australian Stock Exchange;
Shares – not listed on the Australian stock exchange;
Non-residential property;
Units in Unit Trusts;
Cash and term deposits;
Artwork, collectables, metal and jewellery;
Lease of a rented property to a related entity;
You are allowed to lend up to 5% of the fund’s assets to a related entity.
The Trustee can enter into a lease arrangement of a business real estate property with a related party without contravening the in-house asset test.
What is NOT allowed with regards to a SMSF?
The trustee is not allowed to invest in related entities (known as in-house assets). This includes loans or an investment in a related entity, an investment in a related trust of the SMSF, their relatives, business partners and any companies or trusts that have control (either alone or with their other associates). Loans to a company or trust are allowed as long as the member or relative does not have control of the company or trust. They can have equal control or be a minor shareholder.
Allowable Deductions
The following is a summary of allowable deductions than can be claimed:
• Approved audit fees
• Investment expenses of a revenue nature in deriving investment income
• Management and administration expenses
• Depreciation
• Foreign exchange losses (Note: Foreign gains are assessable)
• Supervisory levy
• Prior years losses
• Rental property expenses. Expenses can include advertising for tenants, bank charges, depreciation, gardening costs, insurance, land tax, pest control, property agent’s fees or commissions, repairs and maintenance, stationery, telephone, water charges and travel undertaken to inspect the property or to collect the rent
Death or disability premiums – Insurance premiums paid by a complying SMSF to provide benefits upon death or temporary or permanent disability of a member can claim:
Taxation
Complying superannuation funds are taxed at a maximum of 15% on their earnings and 10% on capital gains made on the disposal of an asset held for 12 months or more. Non-complying funds are subject to a 45% on all income and capital gains from 1 July 2006. In addition, a non-complying fund is required to bring into account as assessable income the entire value of the fund at the end of the last year the fund was complying less any un-deducted contributions resulting in the entire fund be taxed at 45% from 1 July 2006. No capital gains tax is paid if you sell the property once you have retired. In the event you sell the investment property before retirement you only pay 10% of the net gain compared with 15% to 23% discounted rate if you bought the property in your own name.
Cashing of Benefit
The Funds in the SMSF cannot be accessed for private use until;
You cease employment from the age of 60
You retire from the workforce at or after your retirement age
You reach the retirement age of 65, even if you continue to work
You become permanently incapacitated or die or
You meet the criteria of the benefit to be released on financial hardship or compassionate grounds
Financial Planning
Forensic Accounting Group is delighted to announce their alliance with Accumulus Wealth Advice, to provide strategic financial advice, encompassing the following core services:
Superannuation
Wealth Accumulation
Aged Care Advice
Social Security/Centrelink
Retirement Planning & Income Streaming
Forensic Accounting Group & Accumulus Wealth Advice now deliver valued clients with transparent, tailored and trusted advice. We are extremely excited about our alliance with Accumulus Wealth Advice and welcome the opportunity to provide further care and value to all our clients.
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